6

The Economics of Everything

Ever wondered how the rich do theme parks? Their children want to visit Disney World like everyone else, but it is hard to imagine the global elite – or their offspring – spending hours queuing for the rides. One answer is that for around $500 an hour Disney will provide a ‘VIP tour guide’ who will escort you to the front of the queue for selected rides that you have pre-booked. But another solution has recently emerged, both cheaper and more flexible. For $130 an hour, DreamTours Florida will provide a black-market disabled guide to pose as a family member, allowing you to jump the queue along with them. As one Manhattan mother boasted: ‘They escorted me, my husband and two children through the park in a motorized scooter with a handicapped sign on it. We waited less than one minute to get on the It’s a Small World ride when the other kids had to wait over two hours. This is how the 1 per cent does Disney.’1

Queue-jumping is a fast-growing industry. In the US you can now pay LineStanding.com to employ someone (they often use the homeless) to do it for you. The lobbyists who work for big corporations are heavy users of this kind of service. They pay to have someone stand in line to enter Congressional hearings and Supreme Court sittings, often overnight, so the lobbyist can step in just before the session starts. In November 2016, long queues formed outside banks across India as people rushed to change high-denomination notes before they ceased to be legal tender; the rich employed the poor to queue for them. Queue-jumping is one among many things in which trade used to be socially taboo, or even illegal. A Chinese teenager (known as Little Zheng to his friends) sold his kidney to pay for an iPad. Convicts in some US prisons pay an upgrade for a better class of cell. Companies routinely take out insurance policies on their employees’ lives, policies which they then sell on to investors: there is a multibillion-dollar market in these bets on death, originally known as ‘dead peasants insurance’.2

Many of us disapprove of these kinds of trades – but what exactly is wrong with them? Media outrage over Little Zheng’s sale of his kidney seemed more than anything due to his purchase of an iPad with the proceeds. (Presumably, if he had sold his kidney to pay for hospital treatment for his sister, that would have been okay.) A market in kidneys or other organs seems distasteful but, if it increases the supply of organs, then lives will probably be saved. Academics express horror at the idea of richer students buying their way into elite universities. But a simple auction of elite university places might help open them up to ambitious but poor students who value the opportunity highly. Still, almost all of us agree that some things should not be for sale. Yet as soon as we contemplate something which might be on that list, there seem to be powerful arguments for opening it up to the free market after all.

It wasn’t like this in the olden days, they say. But the historical trend is not a simple slide towards everything for sale. The lively market in child labour in Victorian Britain has, thankfully, become a taboo trade in most modern societies. What distinguishes twenty-first-century life from all previous eras is not that ‘more’ things are traded in markets nowadays (what would that mean? how would we count up?) but a change in the way we think: our growing willingness to apply economic thinking to all aspects of life. The arguments we hear nowadays for markets in art, education, kidneys, procreation, queue-jumping, and so on, were unheard of as recently as the 1960s.

This change did not happen by accident. From the late 1950s a handful of economists began to apply economic analysis to areas of life hitherto beyond the realm of economics. The door to this profound expansion of the scope of economics was opened by game theorists like John von Neumann and Oscar Morgenstern, and avowedly mathematical economists like Ken Arrow. In their work, humans were single-purpose robots, constantly calculating in order to maximize their ‘payoff’ (in game theory) or their ‘preference satisfaction’ (in Arrow and most mathematical economics). With this astonishingly limited representation of humanity in hand, there is no reason to restrict attention to the traditional economic realm of producing and consuming stuff. If humans are neither more nor less than robotic maximizers, their maximizing behaviour in other areas of life can be just as readily studied. This was an extension of economic thinking entirely consistent with von Neumann’s dream to create an all-encompassing science of society.

The Chicago economist Gary Becker was the pioneer and leader of this new adventure to expand the scope of economics. At first Becker’s efforts were ridiculed. When he first spoke of children as ‘durable consumer goods’ his audience of economists just laughed. Later, this colonization of the rest of our lives by economic thinking was derided by critics as economic imperialism. Their mockery soon backfired, with Becker and his followers cheerfully adopting the moniker as a description of their project. By the time Becker won the Nobel Prize in 1992, many of his ideas had become part of mainstream economic thinking and had begun to filter into everyday life. Where Becker led, governments followed. In 1987 Becker caused uproar when he proposed that the right to immigrate to a country should go to the highest bidder. This idea, far from shocking us, now shapes immigration policy in the US and many EU countries: anyone can immigrate if they buy enough assets in the host country. In 2019, buying £2 million of UK bonds or stocks gives you the right to live in Britain. Spend £3 million more to cut the waiting time for permanent residence (and once you have that, you can have your cake and eat it by selling your assets and getting your £5 million back).

For many people over forty, with distant memories of the Nanny State, the free market still seems like an exhilarating freedom, a kind of voting machine: it gives us what we want, and more of it, the more we are willing to pay. But where to draw the line with our economic thinking? Globally, we are willing to pay more for anti-wrinkle treatments than for malaria treatments. Does that mean anti-wrinkle treatments are more valuable? And if meaningful access to political and legal systems can be obtained only by those with enough money to pay for good lobbyists, line-standers and lawyers, what does that imply for democracy and justice? And, given that the scope of economic thinking has expanded so dramatically and rapidly in recent decades, where will it take us in the future?

THE NEW ECONOMICS OF EVERYTHING

Ironically, given that he would become notorious for analysing all human behaviour through the lens of selfish homo economicus, the thing that first got Gary Becker thinking about economics seems more altruistic than selfish. As a teenager in 1940s Brooklyn, Gary started reading the financial pages of newspapers, not out of interest – ‘I was rather bored by it,’ he confessed – but to help his businessman father, whose eyesight was failing. Soon, young Gary was transformed: ‘Entering Princeton, I was a socialist,’ he explained. ‘Two years or so later I was no longer a socialist.’ Becker pinpointed the catalysts for his transformation: ‘two things: Milton Friedman and economics’.3 Becker would go on to embrace economics as a universal way of thinking, arguably to a greater extent than any economist before him.

The genesis of big shifts in how we think is often obscure. But here there is no doubt. Becker was the first to extend economic reasoning to aspects of life seemingly far removed from the economy itself. This single-minded, lifelong project began with his PhD thesis, The Economics of Discrimination. Becker focused on the idea that bigotry is financially costly to the bigot: an employer who hires a white worker rather than a black one who is better qualified for the job incurs a cost in doing so. Discrimination is in fact defined by this cost, Becker reasoned, because there will be a financial cost to the employer if and only if the best person for the job is not chosen – which seems a good way of defining when discrimination has occurred. This definition ignores the employer’s motivation. It does not matter, Becker argued, whether the black best candidate for the job is not hired because their employer is a pure bigot, or because other employees refuse to work with a black, or because customers don’t want to look at a black face. Whatever the appalling explanation, the black candidate who should have got the job did not – and this fact alone is sufficient to alert us to discrimination.

Becker’s analysis leaves most of us feeling uneasy, even if we can’t immediately spot what’s wrong with it. The problems begin with Becker’s definition of discrimination: that discrimination occurs only if there is a financial cost to the discriminator. In reality, a firm might refuse to hire the best job applicant for bigoted reasons without incurring a financial cost – missing out on the best applicant is unlikely to affect profits if that employee would be just one among many. In these circumstances, there is no discrimination, according to Becker’s definition. And a landlord may suffer no financial loss if they select only white tenants on racist grounds, so long as those tenants pay their rent and maintain the property. Again, Becker’s theory is blind to this discrimination.

But even behaviour which does satisfy Becker’s narrow definition of discrimination is less of a problem than we might imagine, because the free market will fix it. Or so Becker argued: in the textbook world of competitive markets, any firm with higher production costs than its rivals (whether due to discrimination or not) must either lower its costs (cease discriminating) or be forced out of business. Becker concluded that in competitive markets discrimination cannot exist – it is at most a fleeting phenomenon. Despite being ignored for many years after its first publication in 1957, The Economics of Discrimination has since become much, much more than an ivory-tower exercise. Richard Epstein, a highly influential American legal scholar, has argued that the US Civil Rights Act should be repealed on the basis of Becker’s arguments: since discrimination does not exist, Epstein reasons, anti-discrimination laws are intrusive and unnecessary.

Today, Becker’s ideas have become impossible to avoid – and they remain deeply controversial. Becker doesn’t so much divide opinion as dynamite open a vast chasm with his ideas, forcing people to jump one way or the other. Among Financial Times writers alone, one long-established contributor wrote enthusiastically about Becker’s approach to discrimination, while another regards him as beyond parody.4 Evidence for the latter view is not hard to find. Take perhaps Becker’s most famous work, which he laboured on for many years, A Treatise on the Family.

The Treatise argues that it is efficient for two people to marry and ‘specialize’, as Becker put it, meaning one person works for pay while the other stays at home doing housework and raising children. Becker’s argument was an attempt to apply Adam Smith’s idea about division of labour: if workers specialize in particular tasks, they will be more productive overall. Becker reasoned that marriages with one earner would be more common than other household arrangements because this kind of specialization raised the household’s productivity and in turn its standard of living. Believing that women have a ‘comparative advantage’ in raising children, Becker concluded that women should stay at home while men take paid work. The Treatise was published in 1981 – just as the evidence turned overwhelmingly against Becker, with many more women in Western countries taking paid work. But it’s not just the mismatch between Becker’s stories and the facts; it’s the way he tells them. Here’s Becker on love:

It can be said that M_i loves F_j if her welfare enters his utility function, and perhaps also if M_i values emotional and physical contact with F_j. Clearly, M_i can benefit from a match with F_j, because he could then have a more favourable effect on her welfare – and thereby on his own utility – and because the commodities measuring ‘contact’ with F_j can be produced more cheaply when they are matched than when M_i has to seek an ‘illicit’ relationship with F_j.5

In case you were wondering, the ‘commodity’ in the last sentence is children. As for women who take paid work outside the home, they are repeatedly labelled ‘deviant’ by Becker. In a footnote he states ‘that “deviant” is used in a statistical, and not a pejorative sense’ – although even in 1981 working women were hardly a statistical outlier. Elsewhere in the Treatise, Becker argues that women would generally benefit from the legalization of polygamy, approvingly citing Ayatollah Khomeini of Iran – not an authority famous for his understanding of women’s interests – in support of his argument.6

Becker’s disregard for the facts was not limited to his work on the family. During the 2007–10 financial crisis he was asked whether low-waged and unemployed people who took out huge mortgages which they could not possibly hope to repay were rational. Becker answered yes, they were perfectly rational, since any default was on the lender’s capital, not their own.7 True, but the defaulter still ends up homeless – and being rational surely requires that you prioritize keeping a roof over your head over taking risks with other people’s money.

All this begs a question: if Becker’s own work epitomizes the absurdity of applying economic thinking to manifestly non-economic aspects of life, why is economic thinking nevertheless being extended into more and more areas of contemporary life? More bluntly, how has Becker been so influential on twenty-first-century life if his theories are so obviously flawed?

THE ELUSIVE FREAKONOMICS OF GARY BECKER

One reason for the influence of Becker’s work is, quite simply, its accessibility for other economists. Much cutting-edge research in economics has become like theoretical physics or avant-garde poetry: only intelligible to a small group of insiders. Even for economists, some economic theory outside their specialist field is as unapproachable as James Joyce’s Finnegans Wake – while most of Gary Becker’s work reads more like Dr Seuss.

But a bigger part of the answer is that Becker’s theories are in many respects quite subtle – or perhaps ‘slippery’ would be a better word. Becker’s critics have repeatedly portrayed his approach as selfish homo economicus on the rampage. This is a basic misunderstanding. In the third sentence of his Nobel Prize lecture in 1992, Becker denied any assumption of selfishness in his work. On the contrary, he ‘tried to pry economists away from narrow assumptions about self-interest’. But if applying economic thinking to non-economic aspects of life is not about assuming selfishness, what is it about? Becker described his approach as assuming ‘that individuals maximise welfare as they conceive it, whether they be selfish, altruistic, loyal, spiteful, or masochistic’.

As with von Neumann, Morgenstern and Arrow before him, Becker’s focus was on the mathematical representation of human thinking – as maximization – rather than on what they maximize. The exact meaning of ‘welfare’ was not important. For Becker, then, our behaviour is driven by the desire to maximize something – get as much of what we want as possible – but our goals can be varied and need not involve money or any materialistic goal.

As Becker put it in an assertive summary of his way of thinking in 1976, The Economic Approach to Human Behavior, the twin assumptions that people are maximizers, and markets are mostly free and competitive, ‘used relentlessly and unflinchingly, form the heart of the economic approach.’8 To say this definition of the economic approach proved influential is an understatement: it has become many economists’ favourite way of defining economics. The main reason why was clearly stated by Becker: ‘the economic approach is a comprehensive one that is applicable to all human behaviour’.9 Economists were liberated from the mundane study of the economy; they could now claim expertise in all aspects of life. This was the moment economic imperialism emerged, all guns blazing, into the limelight. The movement begun by Becker in 1976 led to economists doing research on a vast range of new topics, later popularized in books such as Freakonomics (2005), The Undercover Economist (2005) and The Logic of Life (2008).

This new kind of economics is puzzling. It claims to say something about everything yet relies on almost nothing in terms of assumptions. This is surely a con. In fact, on closer inspection, Becker’s work assumes more than just that people maximize something. That is an assumption which could be used to describe the behaviour of almost anyone. Yet Becker’s theories about the family do not seem to be about anyone: they seem to be about people who think in very peculiar ways. There must be more to the elusive economics of Gary Becker. We need to dig deeper to uncover the hidden assumptions.

Becker’s approach can be used to explain everything after it has happened, since almost any human behaviour is consistent with the idea of maximizing something. But to make predictions, Becker’s theories need filling out with specific assumptions. And this is exactly what Becker did in practice. The Treatise on the Family relies on several powerful assumptions. The core argument about specialization assumes unpaid work at home – cooking, cleaning, childcare, and so on – is a more specialized job than the paid employment which might be available. But the reverse assumption seems more plausible. Becker assumes one family member is the altruistic ‘head of the household’, deciding who should do what in order to maximize the welfare of household members overall. Other ad hoc assumptions are casually slipped into the analysis too. In discussing divorce, Becker claims ‘the average divorced person can be presumed to be more quarrelsome and in other ways less pleasant than the average person remaining married’.10

Beyond these questionable assumptions, Becker’s core idea of people maximizing something is not what it seems. It evokes a picture of people perpetually engaged in conscious calculation, yet Becker and those who follow him often deny this. As the story goes, a distinguished academic economist was offered a prestigious job, but in a faraway university. His (non-economist) friend remarked, ‘Well, at least you can use your economics to make the decision – you can quantify all the possible consequences, and weight them by their probabilities.’ The economist replied, ‘Come on, this is serious.’

This story would not make Becker uncomfortable. Becker was once asked whether he had used his own theories when deciding whether or not to become an economist. He summed up his answer as follows:

I believe, rough as it was, my decision to enter economics was a ‘rational’ decision, but people do not literally make a fine-tuned calculation. How many people sit down before they marry and say, oh these are the reasons I should marry this woman, these are reasons why I should not marry her, then weigh these and see if the pluses exceed the minuses? Very few people do that. If your girlfriend knew you did that, she probably would not want to marry you.11

So Becker seems human after all. But how does he reconcile his core assumption that people are maximizers with his awareness that people don’t literally calculate the costs and benefits of every decision?

Becker assumes instead that people behave as if they make these calculations: their behaviour will be akin to that predicted by the theory, even if they don’t actually think in the way the theory describes. Becker’s thinking came direct from ‘by far the greatest living teacher I ever had’ – Milton Friedman.

Friedman’s influence is woven in cross-cutting ways through modern economics. He was a founder member of the Mont Pèlerin Society and rapidly emerged as a force within it comparable to Hayek. Of all the formidable intellects in Chicago economics, Friedman was dominant – it was inevitably Friedman who led the interrogation of Ronald Coase over dinner at Aaron Director’s house. More importantly, Friedman revived monetarism to challenge the Keynesian orthodoxy that had reigned supreme over macroeconomics since the late 1930s. Indeed, many historians cite Friedman’s Presidential Address to the American Economic Association on 29 December 1967 in the Sheraton Hall, Washington DC, as the key moment when monetarism became intellectually respectable again. This respectability encouraged the Reagan and Thatcher governments to adopt monetarist – not Keynesian – economic policies a decade or so later at the start of the 1980s. Naturally, both governments turned to Friedman for advice – by which time the new status of monetarism in economics had been further enhanced with the award of the Nobel Prize for economics to Friedman in 1976.

And yet, despite the huge impact of Friedman’s work on monetarism and related macroeconomic issues, his most enduring influence on modern economics looks set to be his 1953 essay about how economics can be a science, entitled ‘The Methodology of Positive Economics’. Friedman argued that, although many economic theories were obviously at odds with reality, that did not prevent them being scientific. For Friedman – and then Becker – it does not matter if the description of human behaviour in an economic theory is obviously unrealistic: the theory still qualifies as sound science if it makes accurate predictions. ‘Consider the problem of predicting the shots made by an expert billiard player,’ says Friedman.12 Suppose we assume that the player uses complex mathematics to calculate where to aim the ball and how hard to hit it, makes all the calculations correctly and hits the ball perfectly. Using these assumptions, we will generally make good predictions of which shots the player will make, even though the assumptions are obviously false. In other words, the player acts as if they use sophisticated mathematics. Similarly, Friedman argued, consumers and businesses act as if they maximize satisfaction and profits, respectively. Even if they don’t consciously do this, our assumption of maximizing behaviour will give us good predictions.

Economists fell in love with Friedman’s argument because it freed them from the bother of finding realistic assumptions to underpin their theories: the realism of assumptions is not important, Friedman emphasized, as long as the predictions are accurate. Adopting Friedman’s argument, Becker and his followers saw no need to apologize for the caricature of homo economicus that inhabited their theories: the resemblance to actual human beings was tenuous at best, but it didn’t matter.

Despite its influence among economists, however, Friedman’s argument is not taken seriously by philosophers of science. During the 2010 FIFA World Cup, Paul from Germany correctly predicted the outcomes for all six of the German team’s matches. But Paul was an octopus (a shame he wasn’t called Milton). Paul’s success reminds us that correct predictions can be made repeatedly, against the odds, even though there is no basis for them.

Another problem with Friedman’s argument is his flawed analogy of consumers and firms with billiard players. We are confident in our predictions about an expert billiard player because the player’s objective is usually clear (to pot the ball); our prediction is based on the mathematics that, in theory, enables the billiard player to achieve this objective; and we know the player is skilled enough to get close to playing this theoretically optimal shot in practice. Real-world economic decision-making is different. We don’t know the objectives of the economic actor (consumer, worker, manager, and so on); there is no reliable theory to guide them (or us), even if their objectives are clear; insofar as a theoretical guide exists, it is hard for the actor to pursue it due to practical problems such as lack of information, the complexity of the choice, uncertainty about the future, and so on. So we have no understanding on which to base predictions – and that does not change even if, like Paul the octopus, we fluke a run of successful guesses. To begin to understand, say, consumer behaviour, we need realistic assumptions about how consumers think about their goals, how they perceive the choices facing them, what information is available to them, and so on.

We’ve seen how Becker’s theories of discrimination and the family rely on controversial assumptions and definitions which are not immediately obvious. Such hidden assumptions, along with the slippery as if idea of maximization, have together helped Becker and his Freakonomics followers evade criticism. But that alone cannot explain the widespread influence of their economic imperialism.

Perhaps their assumptions are broadly realistic after all. Becker concedes that people don’t engage in elaborate calculations when deciding who to marry, but perhaps they do in other contexts – or at least go through some kind of rough weighing up of costs and benefits. Becker refers to ‘a rise in the shadow price of children reducing the demand for children.’13 Stripping away the jargon, we find a simple idea: when having children involves a bigger financial sacrifice – such as higher rent, because of the need to find larger accommodation – then people are less likely to have them. Yes, this is generally true (there is supporting evidence from a variety of times and places), but we did not need Beckerian economics to reach such an obvious conclusion. Or any kind of economics. Consciously, deliberately, weighing up the pros and cons of alternatives before making a decision is hardly a new idea, even in ‘non-economic’ decision-making. The novels of Jane Austen are full of characters who carefully weigh up the pros and cons of marriage, or taking on the responsibilities of parenthood (even when not the biological parent). In short, as another Nobel laureate in economics put it, Becker’s theories seem to ‘oscillate between the obvious and the false’.14

But the influence of Beckerian economics went far beyond any specific theories he had developed on discrimination, the family, and so on. A confident individualism had begun to emerge across society by the late 1960s. Becker’s broad approach, as summarized so clearly by him in 1976, fitted in perfectly with the new mood. Let’s explore this new Beckerian individualism.

THERE’S NO ARGUING OVER TASTES

First, please lie on the couch. If your economic reasoning process is analogous to that of an expert billiard player, as Becker implied, then the message is an empowering one: you are smarter than you think – you just aren’t aware of the unconscious calculations driving your behaviour. This is Beckerian economics as pop psychotherapy. As one university teacher explains it: ‘I try to teach it as a tool that says “a lot of things that you’ve done are really clever, and you don’t even know why, and let me explain to you what I think is driving you, and tell me if it resonates with you once we make it explicit”.’15

Second, Becker provided an intellectual framework to attack the moral rules, social norms and government interventions that seemed opposed to individualism. On government intervention, Becker and the economic imperialists who followed him typically conclude that government policies are not needed, and existing government interventions should be abandoned. Regardless of the circumstances, their argument for small government is essentially the same: there is no problem for government to fix. The argument is simple but powerful. Since everyone is rational, they will already be making the best possible choices, so there is no scope for government being able to improve matters. The argument combines a fantasy about human rationality with the subtle falsity that improvement is only possible if individuals acting in isolation can make better choices. In reality, progress often requires coordinated change across many groups of people, and government intervention is one way to achieve this coordination. Becker argues, for example, that the early death of smokers or the obese is not a social problem: it simply reflects the preference of some people to forfeit lifespan for the sake of immediate pleasures. Then Becker extends the argument: ‘therefore most (if not all!) deaths are to some extent “suicides” in the sense that they could have been postponed if more resources had been invested in prolonging life. This … calls into question the common distinction between suicides and “natural” deaths.’16

At a stroke, the rationale for much public health policy is dismissed. Even terms like ‘premature death’ are misleading, according to Becker, because there is no such thing as a normal or natural age of death. And poor health is a just a preference.

This brings us to De Gustibus Non Est Disputandum – there’s no arguing over tastes – the title of a highly influential paper published in 1977 by Becker and his Chicago colleague George Stigler (who would win the Nobel Prize in 1982). Highly influential? It hardly seems like news. Most of us see little point in arguing over tastes between apples and pears, chocolate and strawberry ice cream, Mozart or The Beatles. But Becker’s assertion the year before that the economic approach applies to all human behaviour implies that people can have tastes or preferences about anything. In short order the academic literature began to bulge with talk of people’s ‘taste’ for discrimination, immigration, nationalism, suicide, and so on. And if there’s no arguing about those either, much moral and political debate is silenced.

Again, you have to admire the ability of Becker to wrongfoot his critics. Economist Alan Blinder (a future Vice-chairman of the US Federal Reserve) was so exasperated by Beckerian arguments about suicide that in 1974 he published a spoof piece of Beckerian economics, The Economics of Brushing Teeth. But satire only works if the victim recognizes it. Becker didn’t: he thought Blinder’s Teeth paper was interesting and recommended publication in the leading journal of Chicago economics.17

The critics make the obvious point that Becker’s approach ignores our moral values, social norms and religious convictions. But it doesn’t. What it does is collapse them into mere tastes: our cherished values are understood as preferences neither more nor less than our taste for chocolate or strawberry ice cream.

This distinction between values and tastes is much more than wordplay. Arguments about discrimination or premature death from smoking are arguments about values because there is something to argue about, reasons to be given, for and against. This possibility of reasoned argument extends beyond the traditional sphere of morality, not least because the argument can be with myself rather than others: so the scope of mere tastes is more restricted than it first appears. I can have a taste for another slice of chocolate cake, glass of wine or cigarette but at the same time a value, a personal commitment not to have these things. That is why real people sometimes say, ‘If I ask for another one, don’t let me have it.’ Becker’s homo economicus would never say this. Yet it is a uniquely human trait, the ability to step back from our expressed preferences and existing behaviour and ask ourselves whether this is really what we want. Despite their fixation on ‘rationality’, the economic imperialists ignore this possibility of stepping back and reflecting – which is a defining part of what it means to be rational.

If the economic imperialists had banned values from economics, the PR would not have been good – economists as amoral scientists beholden to materialism, and so on. Instead, by treating values as tastes, the imperialists have smothered moral debate with a blanket of welfare calculations and trade-offs, with everything up for grabs, everything for sale. And subtly, largely unnoticed, they have closed off a primary route towards changing people’s behaviour for the better: because there is no arguing over tastes, there is less scope for influencing behaviour through education, whether formal or informal.

The economic imperialists do not recognize the scope for influencing behaviour through the law either. Becker doesn’t get crime. No, really. As he explained in his Nobel Prize lecture: ‘I was puzzled by why theft is socially harmful, since it appears merely to redistribute resources, usually from wealthier to poorer individuals. I resolved the puzzle by pointing out that criminals spend on weapons and on the value of their time in planning and carrying out their crimes and that such spending is socially unproductive …’18

Not quite. Even if the weapons were free and criminals had nothing better to do with their time, theft would still be ‘socially harmful’ – the anger, fear and sense of violation felt by victims, as well as the violence and property destruction which often accompanies theft. Unsurprisingly, given his amoral understanding of crime, Becker completely overlooks the role of publicly proclaimed laws in stigmatizing immoral behaviour. For Becker (and his Chicago judge and lawyer friend Richard Posner, who took ‘justice’ to mean ‘wealth maximization’ in Chapter 3), law discourages crime just by raising its price. Potential criminals calculate the price of crime as the punishment they might face, multiplied by the probability of getting caught. Becker and the Chicago lawyers concluded that a cheap way to discourage crime is to reduce expenditure on law enforcement yet keep the price high by introducing very long prison sentences. In parts of the US which followed this prescription in the 1970s and ’80s, a well-documented crime wave was the result.

In the twenty-first century, although we have wisely begun to listen to criminologists more than economists when it comes to tackling crime, economic imperialism still holds sway over other areas of social policy: too often, we unthinkingly assume that the best response to unethical or antisocial behaviour is to raise its price.

But Becker’s greatest influence on us lies elsewhere. Once values are boiled down to mere tastes, then Becker can conclude that there is no distinction between ‘major and minor decisions such as those involving life and death, in contrast to the choice of a brand of coffee’, or between decisions such as ‘choosing a mate or the number of children in contrast to buying paint’.19 And of course we have markets for coffee and paint. So why not have markets for more life-and-death decisions? Perhaps a market for babies, as Posner proposed in 1978. From the perspective of Becker, Posner and their followers, the presumption is clearly reversed: why wouldn’t you?

We will come back to the baby-market idea, but for now we turn to another kind of economic imperialism, from someone operating entirely independently of Becker. And sometimes highly critical of Becker’s thinking too.

THE NOBEL CONSOLATION PRIZE FOR ECONOMICS

It is easy to pigeonhole Tom Schelling. His career reads like that of a Grade-A Cold War defence hawk. From 1948 to 1953 he worked for the Marshall Plan and then the White House; after that he had stints at RAND and various consultancy jobs in Washington drawing on his expertise in military strategy. Although it was John von Neumann who invented the infamous nuclear war jargon ‘mutually assured destruction’ (largely because he liked the acronym MAD), it was Schelling who became a MAD expert. Schelling was close to some of the most influential figures in the Cold War. In his day job as an economics professor at Harvard he co-taught a course on foreign policy with one of the dominant minds behind post-war US foreign policy, Henry Kissinger. And Schelling was reputed to have more influence than anyone else on the thinking of Secretary of State Robert McNamara. Schelling received the Nobel Prize for economics in 2005 ‘for having enhanced our understanding of conflict and cooperation through game-theory analysis’.

But this pigeonholing is too simplistic. Schelling did not see himself as a game theorist: his bemused response to the Nobel Prize announcement was ‘I must have been doing game theory without knowing it.’20 This reply was partly motivated by Schelling’s view of mathematics. Unlike most game theorists and RAND analysts, Schelling did not assume maths was the best tool for every task – he thought maths was ‘used too much to show off’.21 There was minimal mathematics in Schelling’s work, while game theory played only a supporting role, used creatively and flexibly to gain insights into military strategy.

Schelling, too, was arguably as much a dove as a hawk – albeit a dove immersed in realpolitik. No other recipient of the Nobel Prize for economics has been talked about as a candidate for the Nobel Peace Prize instead. Schelling’s economics prize came late and unexpectedly – he was eighty-four – and many commentators saw it as a consolation prize for having not won the Nobel Prize for Peace.fn1 Schelling’s Nobel lecture even reads as if it could have been written with the peace prize in mind. It begins, ‘The most spectacular event of the past half century is one that did not occur. We have enjoyed sixty years without nuclear weapons exploded in anger’ – and proceeds, not unreasonably, to claim some credit for this outcome.

Schelling certainly deserves credit for his obsession with the possibility of accidental nuclear war. In 1959 he wrote a magazine article outlining scenarios for accidental war. After reading it, Stanley Kubrick was inspired to make Dr Strangelove – with advice from Schelling on the plot. In 1961 Schelling was made chair of a White House committee on ‘War by Accident, Miscalculation, and Surprise’. He discovered that, astonishingly, there was no means of speedy, reliable communication with the Kremlin: ‘I could direct dial my mother three thousand miles away to wish her happy birthday [but] Kennedy had no way to get in touch with Khrushchev.’22 Schelling persuaded President Kennedy to install what became known as ‘the hotline’ to solve the problem. With this single, simple act, Schelling may have made more difference to humanity than all the other thinkers in this book put together – although, with disturbing hindsight, the hotline was not fully operational until after the nuclear near-miss that was the Cuban Missile Crisis. It took until 1963 to persuade Soviet diplomats that the hotline was their idea, and to get special Cyrillic teletypewriters installed in the White House.

As for Schelling’s economics, much of his work has a realism missing from Gary Becker’s world. Like Becker, Schelling studied discrimination. But Schelling was more interested in how discrimination spreads. One evening he played around moving coins on a black-and-white checkerboard according to simple rules. Based on the patterns which emerged, Schelling realized that neighbourhoods can become totally segregated along racial lines if residents seek merely to avoid living in an area where all their neighbours are from another race. A seemingly ‘mild’ preference can have extremely divisive consequences.

Schelling turned his attention back to war, but this time war with yourself. As we have seen, Gary Becker and his followers have a naïve view of our addictions to alcohol, nicotine and some foods: ‘rational addictions’, Becker called them, arguing that they reflect a carefully considered balancing of pleasure against health risk. Schelling was unimpressed: ‘they don’t know what they’re talking about.’ In a 1980 essay, ‘The Intimate Contest for Self-command’, Schelling sought to understand the smoker ‘who in self-disgust grinds his cigarettes down the disposal swearing that this time he means never again to risk orphaning his children with lung cancer and is on the street three hours later looking for a store that’s still open to buy cigarettes’.23 (You can tell that Schelling spent fifteen years trying to quit.) Schelling outlined ‘self-command’ strategies that addicts can use to help win their private war – strategies revolutionary at the time, which are now familiar to behavioural economists and psychologists around the world.

Given Schelling’s nuanced understanding of how we think, far removed from homo economicus, it is perhaps surprising that he was also largely responsible for another form of economic imperialism, another way of replacing ethical considerations with preferences expressed in markets. But necessity is the mother of invention.

HOW MUCH ARE YOU WORTH?

Shortly after the USSR detonated its first atomic bomb in 1949, the US air force asked RAND for help in designing a first-strike attack on the Soviets. The analysts at RAND considered over 400,000 scenarios involving different combinations of bombs and bombers in their attempt to find, almost literally, the biggest bang per buck. They concluded that the US air force should attempt to overwhelm Soviet air defences with huge numbers of planes, including cheap and vulnerable propeller planes carrying no nuclear bombs that would act as decoys to reduce attacks on the planes which did carry bombs. RAND was proud of its work, but the air force generals were furious.

The generals, many of whom were former pilots, rejected the proposal outright and told RAND bluntly that their analysis needed a complete rethink. In calculating the cost of different strategies, RAND had simply ignored the human cost: the air force personnel who would die. So their proposal of a strategy involving cheap planes but high casualties was almost inevitable. RAND’s omission of the human cost was because of internal disagreement over how to value human life. As one senior RAND analyst admitted, ‘factors which we aren’t yet in a position to treat quantitatively tend to be omitted from serious consideration’.24 RAND economists could not even agree whether this was an economic question, for economists to decide. On the one hand, putting a dollar value on pilots’ lives seemed beyond the scope of economics: RAND could do no more than present the Pentagon with different strategies involving various ‘efficient’ combinations of dollar cost and lives lost – it would be up to the Pentagon or the president to make the ultimate trade-off. On the other hand, perhaps the financial investment in pilots (training costs, and so on), while not a full measure of their dollar value, was at least a starting point for such a calculation.

It would take over a decade for a possible resolution to emerge – from the creative mind of Tom Schelling. Schelling’s work on the value of human life was triggered by research undertaken by his PhD student Jack Carlson, a former fighter pilot. They began by looking at military decision-making, although it was soon clear that their ideas had wider applicability. It was surely wrong to value a pilot’s life in terms of the air force’s financial investment in him. Similarly, most economists were uneasy with valuing a civilian life in terms of the person’s earnings (as courts did when determining compensation after industrial accidents). Schelling argued that the most fundamental problem with this approach was that it valued your life in terms of its value to other people, not yourself. Yet, as Schelling acknowledged, the value of human life (to that human) was too ‘awesome’ a question for an economist to address. So he changed the question: ‘Where life and death are concerned, we are all consumers. We nearly all want our lives extended and are probably willing to pay for it. It is worthwhile to remind ourselves that the people whose lives may be saved have something to say about the value of the enterprise …’25

Schelling shifted the question from valuing life to valuing keeping people alive – the value of a reduced risk of death. These were not the lives of particular, named people, but ‘statistical lives’. If a regulation for drinking water will reduce the risk of death per year by just one in 1 million, but the entire population of a large country is affected (say, 100 million people), then the regulation will statistically – on average – save the lives of a hundred people a year. A hundred ‘statistical lives’ are saved. Schelling had a gift for rhetoric (at least by modern economists’ standards) and titled his landmark 1968 essay ‘The Life You Save May be Your Own’. But it was more than just wordplay. Schelling saw a way to infer from someone’s behaviour how much a reduced risk of death might be worth to them.

Here was a new front on which economists could push forward with their imperialistic ambitions, far beyond the decision-making of the US air force. Governments and businesses often face decisions between alternatives which lead to loss of life (or lives not being saved), such as choices involving healthcare, environmental protection or product safety. If a credible money value for human life is available, then decision-makers can simply throw it into their calculations, along with the other costs and benefits of different alternatives – all measured in terms of money, of course. While many people strongly object to this way of thinking, most economists see their complaints as nothing more than irrational squeamishness, a gut ‘yuk’ reaction. Decisions have to be made; resources are finite. As individuals, there is a limit to how much we spend on making our car safer to drive, or on helmets and other equipment for protection when playing dangerous sports. Similarly, there is also a limit to how much a government should spend making drinking water safer, or businesses should be required to spend in minimizing the risk of dangerous side-effects from drugs. All this is unobjectionable. And Schelling’s approach was a big improvement on valuing someone’s life in terms of their earnings.

Today his approach lies at the heart of policy-making in many countries, with a standardized value of statistical life used across much of government. In the US, the value of statistical life is around $10 million (in 2019 prices), and government agencies are compelled by law to decide policy by putting monetary values on the benefits and costs, including the value of life.

Yet there is more to concerns about the value of statistical life than naïve squeamishness. Consider the following thought-experiment-style argument. Suppose there are two jobs, identical in every respect, except that one involves some dangerous task (perhaps handling harmful chemicals or serving on active duty in the army) which implies a one in 10,000 risk of death each year. Textbook free-market economics asserts that any observed difference in wages between these two jobs must be entirely due to this extra risk. Wages in the riskier job are higher only because the employer must offer more money to persuade workers to tolerate the risk. Suppose this ‘wage differential’ between the two jobs is about $1,000. This implies workers will tolerate a one in 10,000 risk of death for $1,000. If there are 10,000 workers each facing this risk, then the total extra wage paid out by employers will be $10 million ($1,000x10,000). And on average one worker will die per year. Workers collectively tolerate the loss of one statistical life, in return for $10 million extra pay.

Incredibly, this is not just a thought experiment. It is Schelling’s method. Using exactly this reasoning, real governments around the world arrive at a monetary value for statistical life via estimates of wage differentials. But there are basic problems with Schelling’s method. When choosing between different, more-or-less risky jobs, real people usually have little knowledge of the probabilities and magnitudes of the risks they face – and even if they have this knowledge, the exact wage on offer is unlikely to be the only factor determining which job they take. What’s more, it is far from obvious that people who take high-risk jobs are in reality expressing a genuine choice at all. Instead, poverty may lead them to take the best-paid job they can get, regardless of the risks.

Even if we set aside such problems and assume that reliable numbers can somehow be found, Schelling’s approach is a misleading one. When non-economists complain that talk of ‘statistical lives’ is misleading, economists dismiss the complaint, again, as mere squeamishness. But the terminology is misleading. It was introduced by Schelling as a rhetorical device to help link government decisions involving loss of life to private decisions involving risk to life. Schelling suspected that economists would take some persuading to derive money values for the former from behaviour at best reflecting the latter. He was right: the initial reaction to ‘The Life You Save May be Your Own’ was deeply hostile. Nowadays, Schelling’s once-controversial logical leap goes unquestioned and talk of ‘statistical lives’ obscures the fact that real lives are lost. If a government decides to scrap the drinking-water regulation described earlier on the grounds that it is too costly, this might be the right decision but, on average, a hundred lives will be lost. (And the laws of probability tell us that it is extremely likely that the actual number will turn out to be very close to a hundred). We just can’t identify in advance exactly who will die. Rather than talk of ‘statistical lives’, it would be more honest to present the decision as ‘causing the death of a hundred people on average, but we do not know who’. And it would force us to confront a hard question – whether we should spend less on saving unidentified lives. At present we spend much more on saving identified lives, such as the child who falls down a well or miners trapped underground.

This points to a fundamental flaw with this kind of economic imperialism in action: there is no single money value of life suitable for all decisions. In different decisions involving risks of death, we make different choices – for good reasons, such as the age of the potential victims, whether the risk is borne voluntarily or imposed by others, whether the risk of death is one in a hundred or one in 100,000, whether the risk is irreversible, and so on. Our laws, morals and social norms acknowledge these reasons, but economists’ insistence on a single money value of life implies we should ignore them. The imperialists say we must use a single money value of life in order to be consistent. But real life is inconsistent. It is not life as homo economicus. And real-world economics is not science.

Schelling himself was inconsistent. He changed his mind. In ‘The Life You Save May be Your Own’, he had great faith in our ability to make rational and consistent choices between risky jobs. But by the time of ‘The Intimate Contest for Self-command’ twelve years later, Schelling had developed a sophisticated analysis of the motives behind our irrational, inconsistent behaviour – and, as we shall see shortly, an equally sophisticated understanding of the problems with expanding the scope of markets.

BABIES AND KIDNEYS

Let’s return, then, to the argument for markets in babies, kidneys and most things besides – an argument which began with the work of Becker and Chicago colleagues including Stigler and Posner but which today attracts supporters from around the world. The core of their argument for new markets is easy to state: if you want something, why shouldn’t you be able to have it? In other words, these economic imperialists see markets as offering an important kind of democracy. There’s no arguing over tastes: markets ignore the kind of elitism that says going to the opera is more valuable than going to a wrestling match. And markets don’t make value judgements about the things you are allowed to trade, or not.

Yet market democracy is not like classical democracy. It is one dollar one vote, not one person one vote: the rich have more say because they have more buying power. This may not be a problem in most markets for ordinary goods and services (and we may be willing to swallow some problems in return for the benefits markets bring). But what about when market democracy actively undermines classical democracy?

At the heart of democracy is the principle that we are all equal citizens. Market activities (lobbying and line-standing, among others) that enable the rich to buy the political outcomes they want clearly undermine equal citizenship. Markets also undermine aspects of equal citizenship beyond the ballot box – equal citizenship rights and duties, including the duty to serve on criminal juries if asked to do so, or perform military or community service. Economic imperialists have been at the forefront of campaigns to introduce markets in citizenship duties: when called to do military service or jury duty, those who can afford it could pay others to serve instead. As for citizenship rights, Becker in 1987 proposed that the right to national citizenship (immigration rights) should go to the highest bidder. In 2009 the growth in refugees led to an update. Becker argued that asylum spaces for refugees should be available only upon payment of a large fee, because this would ‘avoid time-consuming hearings about whether they are really in physical danger if forced to return home’.26

Equal citizenship does not just give us a reason to limit the scope of markets. It enables markets too: for markets to work properly and benefit both parties to a trade, those parties must be trading on roughly equal terms. When one party is desperately poor, vulnerable or powerless, then they are likely to be exploited in market trades and a ban on such trades may be justified. Child labour is prohibited in most countries (albeit with widely differing age definitions for ‘child’) because children are often powerless in labour markets: their labour is sold without their knowledge or consent, or they lack the maturity to understand what the work involves. A woman may enter a contract to sell her unborn baby to parents seeking to adopt, because of desperate poverty or because she does not know how she will feel after she has handed over her child. A desperately poor father might agree to a loan at an extortionate interest rate, knowing he has no hope of ever repaying it, in order to buy essential drugs for his sick child. All these cases suggest, at the least, pause for thought before assuming that markets must benefit both parties to a trade, because markets involve only trades that are freely entered into. In reality, freedom in decision-making is minimal in some contexts, so we cannot assume that market choices make all sides better off.

But how vulnerable, desperate and powerless do people have to be to justify banning markets, or (which amounts to almost the same thing) making contracts unenforceable? One reason why the economic imperialists’ arguments for extending the scope of markets have been so powerfully influential is that there is no short and neat answer to questions like these. Since markets are not all the same – the market for paint is not like the market for reproductive services – then, unsurprisingly, the reasons for not using markets will be different in different contexts too. And the context changes across time and place. That is why a perfectly acceptable market in one era, such as the market for slaves, can be an abomination in another. But to justify restricting the scope of a particular market in a particular time and place, we do not need timeless, universal reasons. That is asking too much. As a society, we can decide to embrace market democracy in most circumstances. In Becker’s terms, people should be generally free to buy what they want, maximizing welfare as they conceive it. But as a society we can simultaneously decide to impose limits on this welfare-maximization process, deciding that some things are not to be traded in markets. Neither philosophy is, or can be, a universal one.

However, it is much easier to contemplate these limits in the abstract than to insist on them in practice. If I need a kidney and I am willing to pay £20,000 to get one, and you are willing to sell yours for £20,000, then not only are we both better off if this transaction goes ahead but my desperate need for a kidney is met. My death may be prevented as a result. This seems to be economic imperialism in the service of a noble goal – yet selling kidneys is illegal in every country except Iran. And the sale of body parts has been explicitly prohibited by the United Nations, the European Union and the World Health Organization. In most countries, there is a severe shortage of kidneys available for transplant. The case for a market rests on the claim that allowing kidneys to be sold will increase their supply. But this cannot just be assumed. (As we will see in the next chapter, paying people to supply something which previously they provided for free does not always increase the supply.)

Economic imperialists have no patience with this response. For them the solution is obvious: as with anything else, if the price is high enough, the supply will come. We just need to calculate how much is enough to get people to supply kidneys. Step forward, of course, Gary Becker: ‘the reservation price of an organ has three main additive components, a monetary compensation for the risk of death … for the time lost during recovery … for the risk of reduced quality of life’.27 In order to come up with a kidney price here (around $19,800 in 2019 prices, in case you were wondering) Becker must make fantastic assumptions, including some we have already met, such as basing his estimate of the cash you must be paid to compensate for the risk of death in kidney-removal surgery on the off-the-shelf numbers circulating among economists for the extra wage needed to get people to do riskier jobs. But setting aside the dodgy basis for the numbers, this way of thinking transforms the debate about buying and selling kidneys. We enter an argument about whether the price is right, an argument in which the economic imperialists have an advantage, because of their mastery of the techniques for generating numbers (they also have a convenient opportunity to charge us big consultancy fees for the privilege of their expertise). Almost without noticing, the wider policy debate is shifted too: can we afford enough kidneys? And even if the price is steep, perhaps it is still cheaper than trying to educate people to commit to donating kidneys after their death. Here, the moral issues are left behind: education becomes just an inefficient method to induce kidney supply.28

Kazuo Ishiguro’s novel Never Let Me Go describes a world in which human clones are bred solely to provide replacement organs for others. Organ markets share something in common with this dystopia: their main effect will be the reallocation of body parts from the poor to the rich. Of course, the economic imperialists will argue that since the poor ‘freely choose’ to sell their organs, they must be better off. However, in the words of one researcher on the global traffic in human organs, ‘perhaps we should look for better ways of helping the destitute than dismantling them’.29

Markets in cases like this clearly pose difficult moral questions. But the arguments of the economic imperialists and their Freakonomics followers are no help. First, because they try to sideline moral questions and assume they can be separated from economics. ‘Morality’ as the authors of Freakonomics put it, ‘represents the way that people would like the world to work – whereas economics represents how it actually does work’.30 Second, because many markets fail even against the narrow benchmark set by the economic imperialists – welfare maximization. Welfare is supposedly maximized because markets allocate goods to the buyers who value them the most, the highest bidders. But how much buyers are willing to pay is not a reliable guide to what is truly valuable for them. People try to look after their own interests, but behavioural economics and psychology have shown how often they make mistakes. Moreover, willingness to pay is often constrained by ability to pay. That is why our global willingness to pay for anti-wrinkle treatments exceeds that for malaria treatments. Yet malaria treatments are more valuable. The last sentence is uncontroversial because while there’s no arguing over tastes, we can surely agree about some needs. Ultimately, the Achilles heel of markets is the one you knew all along: price is a poor measure of value.

A TITANIC QUESTION

The assumption that price is a good measure of value has become so enmeshed in our thinking that we have forgotten how far this represents a revolutionary break from our attitudes just a generation or so ago. Take higher education – yet again, it was Gary Becker’s thinking that triggered a decisive break with the past. Becker invented the now-familiar idea of human capital: today we see nothing wrong with talk of investing in yourself, marketing yourself, defining yourself as a financial asset whose worth is measured by the returns it can generate in the future. With this in mind, he argued that university places, like every other commodity from carrots to kidneys, should go to the highest bidder. Potential students know more than anyone else about how much they stand to gain in human capital from a university place, Becker reasoned, so auctioning places ensures that the human capital gain across society is maximized.

As with the sale of human organs, we can object to this market on grounds of fairness: many of us are no keener that the rich should be able to outbid the poor for access to university than for access to kidneys. But suppose we are not worried about unfairness (or live in a society akin to Norway, with relatively little inequality). We might still be uneasy about selling university places to the highest bidder. Is our unease justified? Yes, because selling places misses the point about university education. We may disagree about the exact purpose of university education, but generally we agree that places should go to those with suitable aptitude, interest and knowledge. This reminds us that, rather than market-based measures of value, education has its own internal values. None of these values – aptitude, interest and knowledge – can be measured by the amount a student is willing to pay to get a place. Some students who pay a lot of money for their university education feel they are buying a good degree result or grade. But obviously they are wrong: internal values (student performance), not price paid, determine the grade awarded. If we use market values to select or evaluate students, it’s not education anymore.

Clearly, then, the problems with the ever-expanding scope of markets go beyond the poor getting a raw deal. Nevertheless, if you aren’t poor, the case for constraining markets seems to rely on your altruism – giving up some of your freedom of choice so that the poor are less excluded. But the interesting thing about protecting the vulnerable, desperate and powerless is that it can help the rest of us too. When the Titanic went down in 1912:

There were enough lifeboats for first class; steerage was expected to go down with the ship. We do not tolerate that anymore. Those who want to risk their lives at sea and cannot afford a safe ship should perhaps not be denied the opportunity to entrust themselves to a cheaper ship without lifeboats; but if some people cannot afford the price of passage with lifeboats, and some people can, they should not travel on the same ship.31

Agree or disagree, there are several surprises here. To begin with, these words come not from a philosopher speculating about moral dilemmas but from the pragmatist Tom Schelling. Schelling begins by noting that we demand that all passengers have access to lifeboats, even if some passengers would rather not pay for them. Yet we don’t make the same demand more generally: in many contexts we allow people to choose different levels of safety depending on how much they pay. Some people buy safer, more expensive cars; some don’t. Intriguingly, Schelling suggests that we might allow the poor to choose less safety, as long as the rest of us don’t have to watch.

This might seem to license a callous disregard for fellow humans. But Schelling seems to have had the opposite reaction in mind. We can’t watch because we care. Imagine finding yourself on a sinking ship with no lifeboat spaces for holders of the cheapest tickets because society has allowed such boats to be built. Imagine not just the fights, but the desperate begging as those without a space plead that they be squeezed in. To prevent lifeboats sinking, the rich will have to push the poor overboard. This is what a society with extreme inequality of citizenship looks like. In a market society, if two parties interact with each other on extremely unequal terms, the results are horrific for the poor but they are painful for the rich too. Schelling the pragmatist identifies an argument for preventing extreme inequalities, relying on nothing more than the self-interest of the better-off members of society. Of course, we can go further. Ultimately, the case for restricting markets to parties trading on roughly equal terms comes from a respect for our common humanity. Lifting up the vulnerable, desperate and powerless enables respectful trade. But if we cannot or will not eliminate extreme inequalities, then it may be best to ban some markets altogether, rather than tolerate trade between extreme unequals.32

We have come a long way from the view that all behaviour can be explained and justified by the economic imperialists’ narrow caricature of rational economic thinking. Like von Neumann before him, Becker’s attempt to provide a complete science of society is a failure. But given its continuing influence, we need to reassert some old truths. Deciding which things should be bought and sold in markets raises moral questions as well as economic ones, and we cannot neatly separate the two. Markets can change the character of what is being traded – obvious in markets for sex, less obvious in markets for higher education; and, of course, price is a poor measure of value.

Meanwhile, the damage wrought by economic imperialism continues. In 2016 the big business news was the revelation that Volkswagen had for years systematically cheated its way through emissions tests for diesel vehicles. From a company with the pristine reputation of Volkswagen, this came as a surprise. But it is hardly surprising that businesses cheat when a licence for bad behaviour is so easy to find: simply combine Becker’s inability to understand that crime is morally wrong with Friedman’s insistence that the only responsibility of business is to maximize profit. How many more business leaders, politicians and others in positions of power have excuses from economic imperialists being whispered in their ears?